As explained in the first part of this series, bitcoin is backed by the blockchain ledger system.
This process is known as “mining”, as the reward for verification of a block is an amount of new bitcoin.
The onerous proof-of-work process is what provides bitcoin with its capacity to be a store of wealth – what makes bitcoin sufficiently “rare”.
The creators of bitcoin first created the blockchain system, which, being “open source”, is universally available to anyone.
In all that time, no one has been able to hack into bitcoin – into the blockchain.
Bitcoin may not be able to be hacked, but nor is it able to prevent “bad actors” from using it as an untraceable currency perfect for money laundering.
Ransomware attacks on the Colonial oil pipeline, and JBS Meats – the US and world’s largest meat packer/distributor – have brought this problem to the fore, and they represent just two high profile cases among many others.
In crypto-world, the fact the DoJ was able to find and recover bitcoins rather brings into question all that crypto is meant to be.
There may still be daylight in between, but emerging as the biggest rival to bitcoin is ether, the crypto-currency behind the Ethereum platform.
As the pool of bitcoin grows, the number of bitcoins provided as reward for successful mining halves at intervals, and once that pool reaches 21 million, no further bitcoin will be released.
The reward for successful ether mining is fixed at 5 ether, and there is no ultimate limit.
In the creators’ own words, it is a “decentralised platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference”.
Instead, to be rewarded, validators must first own ether and then put that ether balance on the line to certify that a block is valid.
And whereas miners of bitcoin receive bitcoins as a reward for their verification of blocks, validators of ether will simply receive a fee for every transaction and smart contract they validate.
As Creighton University academics suggest, “Bitcoin is striving to provide fast and secure transactions while Ethereum is focusing on much more.